Money: Save 10% of your income

Money is important, but if all your money goes out the door and there is none left for the future…your job is just treading water. To get ahead, you need to make changes.

Save 10% of your income

I first read this suggestion in “The Richest Man in Babylon” years ago, but I didn’t take action. 10% seemed such a small amount at the time that I just didn’t do it as it didn’t seem worthwhile. I didn’t set aside a separate account, but said to myself

“I’ll just put some money away when I have some left over at the end of the month”. Of course, that never happened!

Finally, I started a separate account called “Cash” and started putting 10% of my income into it AS SOON AS the money appeared in my account rather than at the end of the month. It was pretty pathetic at first but I had at least started. Now that account has a tidy sum in it and I like watching it grow in small increments each month.

If you saved $20 per week for five years in a savings account with an interest rate of 6% paid monthly, after five years you will have $6,214.33 in this account. If you managed to put $100 away per week, you would have

$31, 071.66 in five years time.Imagine if you had done that five years ago!

This account is not a savings account in that you intend to spend it eventually. It is a lifetime account, one you leave there as the basis to your personal wealth. It should only be used for growing your assets and investing. It is important to do this and recommended by so many wealth coaches for the following reasons.

1) Discipline with money – You have committed to save, you have taken action and you are mastering this amount of money. As it grows you will have the discipline to carry on saving, and you won’t spend it. This proves to yourself that you can control money. It doesn’t control you. You are a saver, not a spender. This is important for your mindset about money.

2) Attraction for more money – This initially tiny but growing amount becomes like a gravitational field and attracts more money. Interest compounding on the account over the years makes the growth accelerate. Compound interest is when interest is paid into the account, which in turn grows the principal, and in turn generates more interest.

3) Basis for further investment – As the amount grows you can use some of it for further investment; not spending, but investment to grow your wealth.

4) A safety net – Although this account is not meant to be touched, it is a safety net in case of emergency. It is there if you lose your job, or you need some expensive surgery, or you are in an accident, or a loved one needs an operation they can’t afford. Life will throw curve balls at you! Having some money in an account you won’t touch is important in case you do really need it someday.

Take action now and open an account for your 10% money.

Think of it as your discipline, your safety net, your dreams, and your money confidence and watch it grow.

Don’t spend it on something you think you really want, as chances are you will want something else in six month’s time. It is not for spending. It is for your future. If you have the discipline to do this, you will also see a change in your attitude towards money quite quickly.

What is 10% of your income now? Will you commit to putting that into a lifetime account? How much will you have in this account after five years?